Investors who had just lifted the market to a record Monday unloaded stocks to lock in profits and amid speculation about a fresh round of austerity measure from the Chinese government to slow sizzling economic growth.

Chinese stocks have been extremely volatile this year, notching one-day drops of 4.9 percent and 3.7 percent already this year and each time the market has bounced back to record highs.

The Shanghai Composite Index tumbled 8.8 percent to close at 2.771.79, its biggest single-day decline since it fell 8.9 percent on Feb. 18, 1997, at the time of the death of Communist Party elder Deng Xiaoping. The index had gained 1.4 percent on Monday to a record 3,040.60.

Chinese share prices doubled last year as investors piled into the market following the completion of shareholding reforms that helped to reduce worries over a potential flood of shares entering the market.

China still limits foreigners' purchases of the yuan-denominated stocks that make up the biggest share of the markets, though that is gradually changing as regulators allow increasing participation by so-called qualified foreign institutional investors.

The Basmanny Court of Moscow arrested Michael Calvey, the founder of Baring Vostok investment fund, on allegations of embezzling 2.5 billion rubles from Vostochny Bank. Calvey will be held in custody until April 13